Yahoo Shares Drop as Alibaba Talks Break Down

The exterior of Yahoo! corporate headquarters in Santa Clara, California.

Talks between Yahoo and its Asian partners regarding the sale of its Alibaba unit have broken down, CNBC confirmed on Tuesday.

Shares of the tech giant traded lower on following the report.

Talks between the tech giant and China's Alibaba Group and Japan's SoftBank are at an impasse over the centerpiece of the discussions — a cash-rich split-off.

Collapse of the proposed deal — referred to as a cash-rich split-off — would mark the latest setback for an erstwhile Internet media giant now struggling to turn its business around and appease unhappy shareholders.

The arrangement was meant to save Yahoo more than $4 billion in U.S. taxes. The company's stakes in Alibaba and Yahoo Japan are worth about $17 billion in the deal.

The talks broke down due to the deal's risks, including the possibility that the Internal Revenue Service would reject it.

A source told CNBC's David Faber that a spin-off deal could still occur, but it is not clear that one will happen anytime soon.